Apple is very protective of its iTunes store and the pricing
model used to distribute music and video. That tight grip over pricing has
caused NBC Universal to break ties with Apple.

NBC Universal will not renew
its contract with Apple to sell TV shows on iTunes. Popular NBC Universal shows
made available on iTunes include "Heroes," “30 Rock” and "The
Office." In fact, NBC Universal is currently the number one provider of
video downloads on iTunes and accounts for 40 percent of video downloads
(roughly 1,500 hours or programming).

NBC Universal's two-year contract ends in December, so
content will still be available on iTunes until that time. Apple and NBC
Universal could still come to an agreement before the end of the contract, but
it appears -- for the moment at least -- that neither side is willing to budge
on the matter.

NBC Universal feels that it should receive a larger cut of
iTunes downloads and have the ability to package content together. Apple on the
other hand has stood its ground with regards to pricing and contends that
packaging video content would lead to confusion for buyers and decrease demand.

The problem isn't really the cost per song, it's that consumers can pick and choose to purchase individual tracks, right? In the old system, you had to purchase an entire CD, which was typically $10-15. Now you can just buy 1-2 songs that you like and only spend $1-2.

I agree with you, the flat rate per song should be eliminated, and individual prices should be set based on individual songs, plus a discounted price offered for purchasing all the songs on a CD.